What is a current account deficit and why is it important for Mexico?

A current account deficit means a country is importing more goods, services, and capital than it's exporting. When this deficit narrows (as Mexico's has to $12.6 billion), it signals improved economic balance and stability. For Mexico, this indicates stronger exports, possibly increased remittances, or better trade terms. A smaller deficit reduces the country's dependency on foreign financing, strengthens its currency, and boosts investor confidence – all positive factors for Mexican businesses and stocks.

What is "nearshoring" and how does it benefit Mexican companies?

Nearshoring is when companies move their operations closer to their target markets, rather than in distant countries. For example, U.S. companies moving manufacturing from Asia to Mexico. This trend benefits Mexican companies through increased industrial activity, job creation, and economic growth. Companies in construction, manufacturing, transportation, and real estate particularly benefit as new facilities are built and supply chains develop. The stocks in this group are positioned to capitalize on this ongoing trend.

Why would a stronger Mexican peso benefit these stocks?

A stronger peso generally indicates a healthier Mexican economy and can benefit stocks in several ways. First, it increases the value of Mexican assets for foreign investors when converted to their home currencies. Second, it reduces costs for Mexican companies that import materials or equipment. Third, it can help control inflation by making imports cheaper. Finally, it signals economic stability, which attracts more foreign investment. For the companies in this group with significant domestic operations, a stronger peso can mean higher profits and stock valuations.

What are ETFs like EWW and FLMX, and how do they work?

ETFs (Exchange-Traded Funds) like EWW and FLMX are investment vehicles that hold a collection of stocks, similar to mutual funds, but trade on exchanges like individual stocks. These specific ETFs focus on Mexican companies – EWW offers broad exposure to the Mexican stock market, while FLMX concentrates on large and mid-sized Mexican companies. They provide a convenient way to invest in Mexico's economic growth without buying individual stocks, offering instant diversification across multiple Mexican companies with a single purchase. They're especially useful for investors who want exposure to Mexico's economic turnaround but may not be familiar with individual Mexican companies.

16 handpicked stocks

Mexico's Economic Turnaround

A carefully curated selection of companies poised to benefit from Mexico's improving economic stability. Professional investors have identified these stocks based on their potential to capitalize on a stronger peso, increased foreign investment, and rising domestic demand.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 30